Results of the First-Quarter Survey | Vol. 1.1 | April 6, 2020
The Canadian Survey of Consumer Expectations (CSCE) focuses on respondents’ views on inflation, the labour market and household finances. The survey for the first quarter of 2020 was conducted between January 29 and February 19, 2020. Results were therefore obtained before COVID‑19 became a major concern for Canadians and affected their outlook. This is the second quarterly publication of the results of the CSCE. Data collection began in the fourth quarter of 2014.
Overview
- Consumers’ expectations for one-year-ahead and five-year-ahead inflation increased slightly in the first quarter of 2020, reversing some declines seen last quarter. The two-year-ahead expectations have been roughly unchanged since early 2018.
- Views on the labour market improved slightly relative to those in the fourth quarter, consistent with a resilient labour market. Consumers’ reported probability of voluntary job departure continued to climb in the first quarter of 2020 and is at a new survey high. The reported probability of losing a job went down somewhat, while expectations for wage growth increased modestly.
- Overall, consumers’ expectations for growth of household income went up slightly in the first quarter of 2020. The rate they expect their household spending to increase over the next year continued to edge up. These expectations for spending growth also continued to surpass consumers’ expectations for income growth, suggesting that consumers were not becoming more cautious in their spending.
- Consumers’ expectations for house price growth went up modestly in Canada overall. Expectations for house price growth increased in Ontario and Quebec, stabilized in British Columbia and remained weak in Alberta and Saskatchewan.
Inflation
In the first quarter of 2020, consumers’ expectations for inflation one year from now ticked up slightly, from 2.2 to 2.5 percent (Chart 1).1, 2 Expected inflation five years from now also increased, reversing the decline seen last quarter. Expectations for inflation two years from now remained stable. These expectations were well below the peak reached in mid-2018. Perceptions about inflation over the past 12 months remained unchanged. Most respondents anticipated inflation will stay in the target range or just above it (Chart 2). Inflation expectations can differ by demographic group (age, level of education and income), suggesting that it is more informative to look at their dynamics than their levels for a better understanding of aggregate inflation pressures.
Chart 1: Inflation expectations
Note: This chart presents median values. For an explanation of the computation, see the Overview. The Overview includes the survey questions.Last observation:
Chart 2: Inflation expectations: distribution
Note: This chart presents shares of respondents with inflation expectations and perceptions in each range. Survey questions are presented in the Overview.
Labour market
Consumers’ expectations for wage growth over the next year were slightly higher than those in the previous survey and were modestly above 2.0 percent (Chart 3). These expectations remained somewhat below inflation expectations, as well as below rates expected in the first half of 2018. Other indicators also point to some improvement in the state of the labour market. First, the likelihood of voluntary job departure continued to climb in the first quarter of 2020 and was at a new survey high (Chart 4). This suggests respondents had an improved view of prospective labour market conditions, since it may reflect they were more confident they could find a better job. Second, their reported probability of losing their job went down somewhat, although it remained near a survey high. This probability increased strongly throughout 2018 but has stayed stable since early 2019. Their reported probability of finding a job if they lost their main job was unchanged in the quarter. Overall, the survey found that consumers’ views of labour market conditions improved modestly relative to the previous quarter. These responses are consistent with a resilient labour market before the impact of the COVID‑19 shock.
Chart 3: Wage growth expectations
* Earnings refers to earnings in the same job, for the same hours worked, before taxes and deductions.
Note: This chart presents median values. For an explanation of the computation, see the Overview. The Overview also includes the survey questions.Last observation:
Chart 4: Labour turnover
Note: This chart presents median values. For an explanation of the computation, see the Overview. The Overview also includes the survey questions.Last observation:
Household finance, credit and house prices
As with their expectations for wage growth, consumers’ expectations for growth of household income went up slightly in the first quarter of 2020, remaining below the peak observed in the first half of 2018 (Chart 5). Expectations for spending growth edged up and continued to surpass expectations for income growth, suggesting that consumers may reduce saving or take on more debt. These expectations offer little evidence that consumers, in aggregate, were becoming more cautious in their spending. Consumers’ expectations for interest rates in two and five years from now increased, with a greater increase in rates two years from now (Chart 6). This increase likely reflects the fact that interest rate expectations were collected between January 29 and February 19, 2020, before concerns about COVID‑19 became prevalent. Consumers’ expectations for the rate of growth in house prices edged up in the first quarter in Canada overall (Chart 7). These expectations increased in Ontario, although they stayed below the highs reached in 2018. Expected growth in house prices also went up in Quebec, but it stabilized in British Columbia and remained weak in Alberta and Saskatchewan.
Chart 5: Household income and spending expectations
* Household income refers to total income from all sources before taxes and deductions.
Note: This chart presents median values. For an explanation of the computation, see the Overview. The Overview also includes the survey questions.Last observation:
Chart 6: Interest rate expectations
Note: This chart presents median values. For an explanation of the computation, see the Overview. The Overview also includes the survey questions.
Chart 7: House price growth expectations
Note: This chart presents median values. For an explanation of the computation, see the Overview. The Overview also includes the survey questions.Last observation:
Endnotes
- 1. We focus on median expectations rather than the average to avoid potential skewness driven by extreme values. For details on the computation of median inflation expectations and other data presented in this report, refer to the Overview.[←]
- 2. As in other countries, in Canada household inflation expectations tend to be somewhat higher than observed inflation. This suggests that it is more informative to focus on changes over time rather than levels. For more details see M.‑A. Gosselin and M. Khan, “A Survey of Consumer Expectations for Canada,” Bank of Canada Review (Autumn 2015): 14–23; and “Survey of Consumer Expectations,” Center for Microeconomic Data, Federal Reserve Bank of New York (December 2019).[←]